Index

Geography

Peru, in western South America, extends for nearly 1,500 mi (2,414 km) along the Pacific Ocean. Colombia and Ecuador are to the north, Brazil and Bolivia to the east, and Chile to the south. Five-sixths the size of Alaska, Peru is divided by the Andes Mountains into three sharply differentiated zones. To the west is the coastline, much of it arid, extending 50 to 100 mi (80 to 160 km) inland. The mountain area, with peaks over 20,000 ft (6,096 m), lofty plateaus, and deep valleys, lies centrally. Beyond the mountains to the east is the heavily forested slope leading to the Amazonian plains.

Government

Constitutional Republic

International Affairs:

International Disputes: Chile and Ecuador rejected Peru's November 2005 unilateral legislation to shift the axis of their joint treaty-defined maritime boundaries along the parallels of latitude to equidistance lines which favor Peru; organized illegal narcotics operations in Colombia have penetrated Peru's shared border; Peru rejects Bolivia's claim to restore maritime access through a sovereign corridor through Chile along the Peruvian border.

Illicit Drugs: Until 1996 the world's largest coca leaf producer, Peru is now the world's second largest producer of coca leaf, though it lags far behind Colombia; cultivation of coca in Peru was estimated at 44,000 hectares in 2016, a decrease of 16 per cent over 2015; second largest producer of cocaine, estimated at 410 metric tons of potential pure cocaine in 2016; finished cocaine is shipped out from Pacific ports to the international drug market; increasing amounts of base and finished cocaine, however, are being moved to Brazil, Chile, Argentina, and Bolivia for use in the Southern Cone or transshipment to Europe and Africa; increasing domestic drug consumption.

Refugees and Displaced Persons:

Refugees (Country of Origin): 173,296 (Venezuela) (economic and political crisis; includes Venezuelans who have claimed asylum or have received alternative legal stay) (2018).Internally Displaced Persons: 59,000 (civil war from 1980-2000; most IDPs are indigenous peasants in Andean and Amazonian regions; as of 2011, no new information on the situation of these IDPs) (2017).

10 major TV networks of which only one, Television Nacional de Peru, is state owned; multi-channel cable TV services are available; in excess of 2,000 radio stations including a substantial number of indigenous language stations (2010).

Cradle of Civilization

The Fertile Crescent is traditionally seen as the birthplace of civilization, and there's a fair deal going for that theory. However, current archaeological evidence suggests that civilization arose in multiple regions at around the same time, including the Andes Mountains. The Norte Chico developed urban settlements in Peru as early as 3200 B.C.E.; unlike other early civilizations the Norte Chico built a fairly dense urban landscape, with many cities concentrated in just a few river basins. The Norte Chico haven't left the same visual arts legacy as other ancient civilizations, surviving artifacts indicate that they had impressive architectural accomplishments and a major textile industry.

The Four Regions

There were many notable cultures that ebbed and flowed before the Spanish conquest of Peru, but the most famous of these hands-down is the Inca. The Inca Empire, or Tawantin Suyu (Four Regions in Quechua), was one of the largest unified nations in the world. The empire was remarkably wealthy and organized. Inca roads connected much of the Andes, administrators kept regular censuses, and despite lacking a uniform currency or market system the Inca economy grew to substantial heights. The Tawantin Suyu included the entire west coast of South America from southern Colombia to central Chile, all run from the capital of Kuzco in Peru.

Perhaps the most impressive part of the Inca Empire is that they reached such uncontestable levels of growth and success without many technologies that many European scholars considered essential for civilization. The Inca didn't have wheeled vehicles, didn't have pack animals, didn't have access to iron, and they didn't have a system of writing. Traditional Western ideas of progress have often mischaracterized these qualities as barbaric or undeveloped, but the Inca were among the best administered societies in the world at their peak.

For empire-wide record keeping they used a complex tool called a Quipu, which encoded numerical data in knots on string. This included taking census figures, making trade agreements, recording historical events, and performing involved math functions. Several hundred quipu exist in the world still today, mostly in museum collections around the world. Many scholars are working hard to decipher the knots in hopes of giving us a clearer image of the empire.

The Conquest of New Castile

By the 1530s, Spanish explorers had learned about the immense wealth of the Inca. Much like they had in Mexico, the Spanish aimed to to expand the crown's coffers by conquering the local government, assuming control of the labor force, and exploiting the region's developed economy. To the serendipity of the Spanish conquistadors, the Inca were in a similar state of political upheaval as the Aztecs had been. The nation's ruler, the Sapa Inca Huayna Capac, had died. He left the kingdom of Quito to his favorite (younger) son Atahualpa, and the rest of the empire to his older son Huáscar. The younger son declared himself emperor and went to war.

The Spanish explorer Francisco Pizarro arrived in 1531 to conquer the country and create the viceroyalty of New Castile. The brothers' conflict weakened central authority and crippled the country's ability to respond to the oncoming crisis. What's more, many local elites actively invited the Spanish as a means of toppling their political rivals. Early in the conquest, Pizarro found his way to Atahualpa. The prince agreed to parley with the Spaniards, and took a small handful of troops to meet Pizarro. The Spanish demanded that the Inca submit to Spanish authority. Unsurprisingly, Atahualpa refused. Upon the refusal, Pizarro kidnapped him and held him for ransom. When the ransom was paid he continued to hold Atahualpa prisoner. The Spanish coordinated Huáscar's assassination, which they blamed on the younger brother. By this point, the central administration was in disarray, and the Spanish quickly assumed control. They executed Atahualpa in 1533, charging him with various crimes (including his brother's murder). Some of the Inca would retreat further into the mountains, where they would resist Spanish rule for another forty years.

Colonial Rule

The early years of colonial rule in Peru echoed the years immediately before. The Spanish leaders in the new colony fought and schemed against each other. Pizarro's rivalry with another conquistador, Diego de Almagro I, escalated into armed conflict. Pizarro had Almagro executed in 1538. In 1541 Pizarro himself was assassinated by supporters of Diego Almagro II, who was in turn defeated in battle and executed by the new Spanish governor of New Castile.

After the fighting stopped, New Castile would become the largest and most important colony in the Spanish Empire. One of the most inspired (and cruel) moves by the Spanish colonial government was their continuation of Inca gold and silver mining. Rather than a market system, the Inca economy was structured around a complex system of labor obligations to the empire (meaning people would do labor for the empire and then have their needs met, rather than an exchange of value for labor and value for goods). The Spanish simply slotted themselves into this existing structure to coerce unpaid labor out of the native amerindian populations. This quickly evolved into unabashed slavery, and when the native populations died out they were replaced by imported African slaves. The colony grew incredibly wealthy and vast, prompting the crown to eventually break it up into numerous parts (which would become many of the countries of South America today).

Independence from Spain

Peru proclaimed its independence, but the Spanish were not finally defeated until 1824. For a hundred years thereafter, revolutions were frequent; a new war was fought with Spain in 1864–1866, and an unsuccessful war was fought with Chile from 1879 to 1883 (the War of the Pacific).

Peru emerged from 20 years of dictatorship in 1945 with the inauguration of President José Luis Bustamente y Rivero after the first free election in many decades. But he served for only three years and was succeeded in turn by Gen. Manuel A. Odria, Manuel Prado y Ugarteche, and Fernando Belaúnde Terry. On Oct. 3, 1968, Belaúnde was overthrown by Gen. Juan Velasco Alvarado. In 1975, Velasco was replaced in a bloodless coup by his prime minister, Gen. Francisco Morales Bermudez, who promised to restore civilian government. In elections held on May 18, 1980, Belaúnde Terry, the last civilian president, was elected president again.

The Maoist guerrilla group Shining Path, or Sendero Luminoso, began their brutal campaign to overthrow the government in 1980. The military's subsequent crackdown led to further civilian human rights abuses and disappearances. A smaller rebel group, Tupac Amaru, also fought against the government. About 69,000 people were killed during the 1980–2000 wars between rebel groups and the government. The deaths were carried out by the rebels (54%) as well as the military (30%); other militias were responsible for the remainder.

A New Era of Government

Peru's fragile democracy survived. In 1985, Belaúnde Terry was the first elected president to turn over power to a constitutionally elected successor since 1945. Alberto Fujimori won the 1990 elections. Citing continuing terrorism, drug trafficking, and corruption, Fujimori dissolved Congress, suspended the constitution, and imposed censorship in April 1992. By September, all but Shining Path had been vanquished. A new constitution was approved in 1993.

Fujimori was reelected in 1995 and again in May 2000 to a third five-year term, after his opponent, Alejandro Toledo, withdrew from the contest, charging fraud. In Sept. 2000, Fujimori's intelligence chief, Vladimiro Montesinos, was videotaped bribing a congressman. Fujimori announced he would dismantle the powerful National Intelligence Service, which has been accused of human rights violations. Two months later, he stunned his nation by resigning during a trip to Japan. Revelations that Fujimori secretly held Japanese citizenship—and could not be extradited to face corruption charges—enraged the populace.

Fujimori Rival Toledo Continues Corruption

In 2001, the centrist Alejandro Toledo was elected president with 53% of the vote, narrowly defeating former president Alan García. His rags-to-riches story and mixed Indian and Latino heritage made him popular among the poor. Inheriting a country racked by economic troubles and corruption, Toledo did little, however, to restore confidence in the government. Early in his presidency, he gave himself a significant pay raise while at the same time calling for economic austerity. In June 2002, a popular revolt took place in the cities of Arequipa and Tacna and in other areas of southern Peru after the sale of two state-run electricity firms to a Belgian company, Tractebel. Toledo had specifically promised during his campaign not to sell these firms. Opinion polls at the time indicated that more than 60% of Peruvians were adamantly opposed to privatization and foreign investment, which in the past had led to price increases, mass layoffs, corruption, and few discernible benefits for the populace. A series of scandals and political missteps between 2003 and 2005 caused Toledo's approval ratings to plummet, at one point as low as 8%.

The Return of Alan García

In the first round of presidential elections in April 2006, voters chose a former army officer, Ollanta Humala, from among 20 candidates. But in the second round in June, former president Alan García, whose 1985–1990 administration left Peru in economic ruin, made a startling comeback, winning with 52.6% of the votes. Election analysts have suggested that voters felt Humala, a former military leader who had once led a coup, was unpredictable and capable of eroding Peru's democracy, and that García, despite his proven economic incompetence and a reputation for corruption, was the marginally better bet.

In Aug. 2007, an 8.0-magnitude earthquake struck 95 miles southeast of Lima, killing at least 430 people and leveling churches and homes.

In Sept. 2007, Chile's Supreme Court approved the extradition of former president Alberto Fujimori to Peru in order to try him on charges of corruption and human rights abuses. He had been in Chile since 2005, when he was detained after stopping there on his way from voluntary exile in Japan back to Peru in order to attempt a political comeback.

On Oct. 10, 2008, García's entire cabinet was forced to resign over an oil corruption scandal. On Oct. 11, 2008, in an attempt to regain popularity, President García appointed a leftist regional governor, Yehude Simon, as his prime minister—a move that shocked many. García's popularity took a hit in 2009 when he passed land laws that allowed large sections of the Amazon to be auctioned off to oil and gas companies. Violent protests against the laws broke out in the Amazon, and Simon resigned in July 2009 after he negotiated a settlement that included repeal of the laws. García replaced Simon with Javier Velásquez .

In April 2009, after a televised trial that lasted 16 months, Alberto Fujimori was found guilty of human rights abuses and corruption. He was sentenced to 25 years in prison. Three months later, he was convicted of illegally paying off his former intelligence chief, Vladimiro Montesinos, with $15 million in state funds. Montesinos is serving a prison term for corruption.

An Ex-Officer Becomes President

In June 2011, Ollanta Humala, an ex-army lieutenant-colonel, was elected president. He narrowly defeated Keiko Fujimori, daughter of former president Alberto Fujimori, who remains in prison for human rights abuses and corruption. This was Humala's second run at the presidency. In 2006, even though Humala had no political experience at the time, he barely lost the election to Alan García. During that election, Humala aligned himself with President Hugo Chávez of Venezuela. For this election, Humala downplayed his radical past and reinvented his image to be viewed as a more moderate leftist, like former Brazilian president Luiz Inácio Lula da Silva.

Even though Peru has experienced an economic boom, poverty remains a huge issue. Humala's election over the well-known, conservative Fujimori exposed a discontent over how the economic growth has failed to help people living in dire conditions. Humula has vowed to help poorer Peruvians. "It's not possible to say that the country is progressing when 12 million people are living in miserable conditions without electricity or running water," he said to supporters after his victory. Humala plans to raise taxes on mining companies and have the government play a bigger role in the economy.

Government Refuses to Negotiate over Hostages

On February 12, 2012, Florindo Eleuterio Flores Hala, known as Comrade Artemio, was badly wounded after fighting with Peruvian troops. Head of the Shining Path faction based in the Upper Huallaga Valley, Artemio was arrested after the battle. President Humala released a statement, saying that the capture of Artemio meant the Shining Path were now defeated in the Alto Huallaga valley. This marked a major victory for the Peruvian Government because the Alto Huallaga valley is a major area of cocaine production. On March 3, Walter Diaz was captured. Diaz was a major candidate to replace Artemio as leader. Exactly one month later, another leading candidate to succeed Artemio, Jaime Arenas Caviedes was arrested. With Caviedes in custody, President Humala said that the Shining Path was no longer operational in Alto Huallaga Valley.

On April 9, 2012, another major faction of the Shining Path kidnapped 42 workers in the Ene and Apurimac valleys. The area is the last stronghold of the rebels, who once were a major problem for the government. However, after recent captures of leaders in the Upper Huallaga Valley faction, the Shining Path has been limited to small gangs and only participating in drug trafficking. The hostages were employees of Skanska, Coga, and Construcciones Modulares. They were working on a new gas plant when they were abducted.

The Shining Path demanded ten million in ransom for the safe return of the hostages. The Peruvian government refused to negotiate. On local TV, Justice Minister Juan Jiménez said that they would "not negotiate with terrorists, the government acts within the law." The government sent 1,500 troops to the area. Defense Minister Alberto Otarola also traveled to the area to lead the effort to free the hostages.

On July 23, 2012, Prime Minister Oscar Valdés and his government resigned. The resignation came after Valdés received heavy criticism on how he handled the Conga mining project, a project involving surface mining of a copper quarry that also contains gold. Valdés came down hard against activists who protested against the project as well as other social issues. Juan Jiménez was named the new prime minister. However, Jiménez resigned a little over a year later, on October 29, 2013. He was replaced by César Villanueva, president of San Martin, a region in northern Peru.

Former President Denied Pardon

On June 7, 2013, President Ollanta Humala stated that he would not grant a pardon to former President Alberto Fujimori. Fujimori's family requested the pardon back in October 2012 for medical reasons. In prison for corruption and human rights violations, Fujimori has tongue cancer and other health problems. Humala said he reviewed information from Fujimori's doctors as well as the former president's crimes to make his decision. Prior to Humala's decision, a presidential commission had advised against giving Fujimori a pardon.

While president from 1990 to 2000, Fujimori oversaw the fight against the Shining Path, a guerrilla group. In 2009, he was sentenced to 25 years in prison for overseeing death squads that killed at least 25 people.

René Cornejo was sworn in as prime minister on Feb. 24, 2014. He became the fifth prime minister to serve since President Humala's first term began in July 2011. He resigned five months later after a political scandal. Minister of Labor Ana Jara replaced him as prime minister on July 22, 2014

However, on March 31, 2015, the Peruvian Congress voted to remove Jara as prime minister because she allegedly spied on lawmakers, journalists, and other citizens. The following month, Minster of Defense Pedro Cateriano was named the new prime minister. Cateriano became the seventh prime minister during Humala's first term in office.

U.S. Department of State Background Note

Peru

Index:

PEOPLE

When the Spanish landed in 1531, Peru's territory was the nucleus of the highly developed Inca civilization. Centered at Cuzco, the Incan Empire extended over a vast region from northern Ecuador to central Chile. In search of Inca wealth, the Spanish conqueror Francisco Pizarro, who arrived in the territory after the Incas had fought a debilitating civil war, conquered the weakened people. The Spanish captured the Incan capital at Cuzco by 1533, and consolidated their control by 1542. Gold and silver from the Andes enriched the conquerors, and Peru became the principal source of Spanish wealth and power in South America.

Pizarro founded Lima in 1535. The viceroyalty established at Lima in 1542 initially had jurisdiction over all of the Spanish colonies in South America. By the time of the wars of independence (1820-24), Lima had become one of the most distinguished and aristocratic colonial capital and the chief Spanish stronghold in the Americas.

IndependencePeru's independence movement was led by Jose de San Martin of Argentina and Simon Bolivar of Venezuela. San Martin proclaimed Peruvian independence from Spain on July 28, 1821. Emancipation was completed in December 1824, when Venezuelan General Antonio Jose de Sucre defeated the Spanish troops at Ayacucho, ending Spanish rule in South America. Spain subsequently made futile attempts to regain its former colonies, but in 1879 it finally recognized Peru's independence.

After independence, Peru and its neighbors engaged in intermittent territorial disputes. Chile's victory over Peru and Bolivia in the War of the Pacific (1879-83) resulted in a territorial settlement in which Peru ceded the department of Tarapaca and the provinces of Tacna and Arica to Chile. In 1929, Chile returned Tacna to Peru. Following a clash between Peru and Ecuador in 1941, the Rio Protocol--of which the United States is one of four guarantors (along with Argentina, Brazil and Chile)--sought to establish the boundary between the two countries. Continuing boundary disagreement led to brief armed conflicts in early 1981 and early 1995, but in 1998 the governments of Peru and Ecuador signed an historic peace treaty and demarcated the border. In late 1999, the governments of Peru and Chile likewise implemented the last outstanding article of their 1929 border agreement. Peru and Chile still dispute the sea boundary.

Contemporary History

Military Rule and Return to Democracy (1968-1980) The military has been prominent in Peruvian history. Coups have repeatedly interrupted civilian constitutional government. The most recent period of military rule (1968-80) began when Gen. Juan Velasco Alvarado overthrew elected President Fernando Belaunde Terry of the Popular Action Party (AP). As part of what has been called the "first phase" of the military government's nationalist program, Velasco undertook an extensive agrarian reform program and nationalized the fishmeal industry, some petroleum and mining companies, and several banks.

Because of Velasco's economic mismanagement and deteriorating health, he was replaced in 1975 by Gen. Francisco Morales Bermudez. Morales Bermudez tempered the authoritarian abuses of the Velasco administration and began the task of restoring the country's economy. Morales Bermudez presided over the return to civilian government under a new constitution and in the May 1980 elections, President Belaunde Terry was returned to office by an impressive plurality.

Instability in the 1980s (1982-1990) Nagging economic problems left over from the military government persisted, worsened by an occurrence of the "El Niño" weather phenomenon in 1982-83, which caused widespread flooding in some parts of the country, severe droughts in others, and decimated the fishing industry. The fall in international commodity prices to their lowest levels since the Great Depression combined with the natural disasters to decrease production, depress wages, exacerbate unemployment, and spur inflation. The economic collapse was reflected in worsening living conditions for Peru's poor and provided a breeding ground for social and political discontent. The emergence of the terrorist group Sendero Luminoso (Shining Path) in rural areas in 1980--followed shortly thereafter by the Tupac Amaru Revolutionary Movement (MRTA) in Lima--sent the country further into chaos. The terrorists were financed in part from alliances with narcotraffickers, who had established a stronghold in the Peruvian Andes during this period. Peru and Bolivia became the largest coca producers in the world, accounting for roughly four-fifths of the production in South America.

Amid inflation, economic hardship, and terrorism, the American Popular Revolutionary Alliance (APRA) won the presidential election in 1985, bringing Alan Garcí­a Pérez to office. The transfer of the presidency from Belaunde to Garcí­a on July 28, 1985, was Peru's first transfer of power from one democratically elected leader to another in 40 years.

The Fujimori Decade (1990-2000)Economic mismanagement by the Garcí­a administration led to hyperinflation from 1988 to 1990. Concerned about the economy, the increasing terrorist threat from Sendero Luminoso, and allegations of official corruption, voters chose a relatively unknown mathematician-turned-politician, Alberto Fujimori, as president in 1990. Fujimori felt he had a mandate for radical change. He immediately implemented drastic economic reforms to tackle inflation (which dropped from 7,650% in 1990 to 139% in 1991), but found opposition to further drastic measures, including dealing with the growing insurgency. On April 4, 1992, Fujimori dissolved the Congress in the "auto-coup," revised the constitution, and called new congressional elections. With a more pliant Congress, Fujimori proceeded to govern unimpeded. Large segments of the judiciary, the military and the media were co-opted by Fujimori's security advisor, the shadowy Vladimiro Montesinos. The government unleashed a counterattack against the insurgency that resulted in countless human right abuses and eventually quashed the Shining Path and MRTA. During this time he also privatized state-owned companies, removed investment barriers and significantly improved public finances.

Fujimori's constitutionally questionable decision to seek a third term, and subsequent tainted electoral victory in June 2000, brought political and economic turmoil. A bribery scandal that broke just weeks after he began his third term in July forced Fujimori to call new elections in which he would not run. Fujimori fled the country and resigned from office in November 2000. A caretaker government under Valentin Paniagua presided over new presidential and congressional elections in April 2001. The new elected government, led by President Alejandro Toledo, took office July 28, 2001.

The Toledo Administration (2001-2006) The Toledo government successfully consolidated Peru's return to democracy, a process that had begun under President Paniagua. The government undertook initiatives to implement the recommendations made by the Truth and Reconciliation Commission (TRC), which had been charged with studying the circumstances surrounding the human rights abuses and violations committed between 1980 and 2000. Criminal charges for corruption and human rights violations were brought against former President Fujimori, who is in Chile fighting efforts to extradite him to Peru. Despite being a frequent target of media criticism, Toledo maintained strong commitments to freedom of the press.

Under President Toledo, Peru signed a Trade Promotion Agreement (TPA) with the U.S., to replace the Andean Trade Preferences and Drug Eradication Act, which was due to expire in December 2006. Toledo also unveiled the construction of a road that will connect Brazil and Peru's isolated interior to the Pacific coast.

Toledo's economic management led to an impressive economic boom in Peru that remains strong. Poverty reduction has been uneven, however. Although poverty in some areas has decreased by up to 37% over the last five years, nationally it has only decreased by 5% and over half of Peruvians are still considered to be living below the poverty line (living on less than $2 a day). In 2005 the government implemented "Juntos," a program to double the income of people living under extreme poverty (less than $1 a day).

2006 Elections and Transition to the Garcia Administration On June 4, 2006, APRA candidate Alan Garcí­a Pérez was elected to the presidency by 52.5% of the voters in his runoff with Ollanta Humala, who ran under the Union for Peru, with the support of his Peruvian Nationalist Party. With 36 seats, APRA has the second largest bloc--next to the Union for Peru Party's 45 seats--in the 120-seat unicameral Congress which was sworn in July 2006. After a disappointing presidential term from 1985 to 1990, Garcí­a returned to the presidency with promises to improve Peru's social condition, balancing economic stability with increased social spending. His stated primary goal is to decrease poverty through job creation, especially in Peru's southern highlands where poverty is most acute. He has sought to improve relations with Peru's South American neighbors and with the United States, and to present Peru's democratic and pro-free trade path as a model for the region.

Constitution and Political InstitutionsThe president is popularly elected for a five year term. A constitutional amendment passed in 2000 prevents reelection. The first and second vice presidents also are popularly elected but have no constitutional functions unless the president is unable to discharge his duties. The principal executive body is the Council of Ministers, comprised of 15 members and headed by a prime minister. The president appoints its members, who must be ratified by the Congress. All Executive laws sent to Congress must be approved by the Council of Ministers.

The legislative branch consists of a unicameral Congress of 120 members. In addition to passing laws, Congress ratifies treaties, authorizes government loans, and approves the government budget.

The judicial branch of government is headed by a 16-member Supreme Court. The Constitutional Tribunal interprets the constitution on matters of individual rights. Superior courts in departmental capitals review appeals from decisions by lower courts. Courts of first instance are located in provincial capitals and are divided into civil, penal, and special chambers. The judiciary has created several temporary specialized courts in an attempt to reduce the large backlog of cases pending final court action. In 1996 a human rights ombudsman's office was created.

Peru is divided into 25 regions. The regions are subdivided into provinces, which are composed of districts. High authorities in the regional and local levels are elected. The country's latest decentralization program is in hiatus after the proposal to merge departments was defeated in a national referendum in October 2005.

ECONOMY

Peru's economy has shown strong growth over the past five years, helped by market-oriented economic reforms and privatizations in the 1990s, and measures taken since 2001 to promote trade and attract investment. GDP grew 8.0% in 2006, 6.7% in 2005, 4.8% in 2004, 4.0 in 2003, and 4.9% in 2002. President Alan Garcia and his economic team have continued these policies. GDP is projected to grow by more than 7% in 2007. Recent economic expansion has been driven by construction, mining, export growth, investment, and domestic demand. Inflation is projected to remain under 2% in 2007, and the fiscal deficit is only 0.6% of GDP. In 2006 external debt decreased to $28.3 billion, and foreign reserves were a record $17.3 billion at the end of 2006.

Peru's economy is well managed, and better tax collection and growth are increasing revenues, with expenditures keeping pace. Private investment is rising and becoming more broad-based. The government has had success with recent international bond issuances, resulting in ratings upgrades. The Garcia administration is studying decentralization initiatives, and is focused on bringing more small businesses into the formal economy.

Foreign TradePeru and the U.S. signed the U.S.-Peru Trade Promotion Agreement (PTPA) on April 12, 2006 in Washington, DC. The PTPA was ratified by the Peruvian Congress on June 28, 2006, but has not yet been ratified by the U.S. Congress. On December 9, 2006, the U.S. Congress extended the Andean Trade Preference Act (ATPA) as amended by the Andean Trade Promotion and Drug Eradication Act (ATPDEA)--jointly referred to as ATPA/ATPDEA--through June 2007. On June 30, 2007 the President signed legislation extending ATPA/ATPDEA for an additional 8 months.

Peru registered a trade surplus of $8.8 billion in 2006. Exports reached $23.7 billion, partially as a result of high mineral prices. Peru's major trading partners are the U.S., China, EU, Chile and Japan. In 2006, 23.0% of exports went to the U.S. ($5.9 billion) and 16.0% of imports came from the U.S. ($2.9 billion). Exports include gold, copper, fishmeal, petroleum, zinc, textiles, apparel, asparagus and coffee. Imports include machinery, vehicles, processed food, petroleum and steel. Peru belongs to the Andean Community, the Asia-Pacific Economic Cooperation (APEC) forum, and the World Trade Organization (WTO).

Foreign InvestmentThe Peruvian Government actively seeks to attract both foreign and domestic investment in all sectors of the economy. The registered stock of foreign direct investment (FDI) is over $15.4 billion, with the U.S., Spain, and the United Kingdom the leading investors. FDI is concentrated in telecommunications, mining, manufacturing, finance and electricity.

Mining and EnergyPeru is a source of both natural gas and petroleum. In August 2004, Peru inaugurated operations of the Camisea natural gas project. Camisea gas is fueling an electricity generator and six industrial plans in Lima, with other facilities in the process of switching to gas. In a second phase, liquefied natural gas (LNG) will be exported to the west coast of the United States and Mexico. The gas and condensates from Camisea are equivalent to some 2.4 billion barrels of oil, approximately seven times the size of Peru's proven oil reserves. The Camisea project, when completed, is expected to gradually transform Peru's economy, catalyze national development and turn Peru into a net energy exporter.

Peru is the world's second-largest producer of silver, sixth-largest producer of gold and copper, and a significant source of the world's zinc and lead. Mineral exports have consistently accounted for the most significant portion of Peru's export revenue, averaging around 50% of total earnings from 1998 to 2005 and 62% in 2006.

FOREIGN RELATIONS

Peru generally enjoys friendly relations with its neighbors.

In November 1999, Peru and Chile signed three agreements that put to rest the remaining obstacles holding up implementation of the 1929 Border Treaty. (The 1929 Border Treaty officially ended the 1879 War of the Pacific.) In late 2005, a declaration of maritime borders by Peru's Congress set off a new round of recriminations with Chile, which claims that the maritime borders were agreed to in fishing pacts dating from the early 1950s. In contrast, the Garcia administration has recently made overtures to Chile, aimed at improving that relationship.

In October 1998, Peru and Ecuador signed a peace accord to resolve once and for all border differences that had sparked violent confrontations. Peru and Ecuador are now jointly coordinating an internationally sponsored border integration project. The U.S. Government, as one of four guarantor states, was actively involved in facilitating the 1998 peace accord between Peru and Ecuador and remains committed to its implementation. The United States has pledged $40 million to the Peru-Ecuador border integration project and another $4 million to support Peruvian and Ecuadorian demining efforts along their common border.

In 1998, Peru became a member of the Asia-Pacific Economic Cooperation (APEC) forum, facilitating closer ties and economic relations between Peru and Asian nations. Peru will host the APEC Summit in 2008.

Peru has been a member of the United Nations since 1949, and is a member of the Security Council. Peruvian Javier Perez de Cuellar served as UN Secretary General from 1981 to 1991.

Peru maintains 210 troops in peacekeeping operations in Haiti under the UN's MINUSTAH.

U.S.-PERUVIAN RELATIONS

The United States enjoys strong and cooperative relations with Peru. Relations were strained following the tainted re-election of former President Fujimori in June 2000, but improved with the installation of an interim government in November 2000 and the inauguration of the government of Alejandro Toledo in July 2001. Relations with President Garcia's administration are positive. The United States continues to promote the strengthening of democratic institutions and human rights safeguards in Peru and the integration of Peru into the world economy.

The United States and Peru cooperate on efforts to interdict the flow of narcotics, particularly cocaine, to the United States. Bilateral programs are now in effect to reduce the flow of drugs through Peru's port systems and to perform ground interdiction in tandem with successful law enforcement operations. These U.S. Government-supported law enforcement efforts are complemented by an aggressive effort to establish an alternative development program for coca farmers in key coca growing areas to voluntarily reduce and eliminate coca cultivation. This effort is funded by the Department of State's Bureau of International Narcotics and Law Enforcement Affairs (INL) and the U.S. Agency for International Development (USAID).

U.S. investment and tourism in Peru have grown substantially in recent years. The U.S. is Peru's number one trade partner, and economic and commercial ties will deepen if the U.S.-Peru Trade Promotion Agreement (PTPA) is passed by the U.S. Congress.

About 200,000 U.S. citizens visit Peru annually for business, tourism, and study. About 16,000 Americans reside in Peru, and more than 400 U.S. companies are represented in the country.

The embassy is open from 8:00 a.m. to 5:00 p.m., Monday-Friday, except U.S. and some Peruvian holidays. The mailing address from the United States is American Embassy Lima, APO AA 34031 (use U.S. domestic postage rates). The American Citizen Services section is open to the public from 8:00 a.m. to 12:00 p.m.

TRAVEL AND BUSINESS INFORMATIONThe U.S. Department of State's Consular Information Program advises Americans traveling and residing abroad through Consular Information Sheets, Public Announcements, and Travel Warnings. Consular Information Sheets exist for all countries and include information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Public Announcements are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

The Department of State encourages all U.S citizens traveling or residing abroad to register via the State Department's travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.

Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.

The National Passport Information Center (NPIC) is the U.S. Department of State's single, centralized public contact center for U.S. passport information. Telephone: 1-877-4USA-PPT (1-877-487-2778). Customer service representatives and operators for TDD/TTY are available Monday-Friday, 7:00 a.m. to 12:00 midnight, Eastern Time, excluding federal holidays.

Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 877-FYI-TRIP (877-394-8747) and a web site at http://www.cdc.gov/travel/index.htm give the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. A booklet entitled "Health Information for International Travel" (HHS publication number CDC-95-8280) is available from the U.S. Government Printing Office, Washington, DC 20402, tel. (202) 512-1800.

Further Electronic InformationDepartment of State Web Site. Available on the Internet at http://www.state.gov, the Department of State web site provides timely, global access to official U.S. foreign policy information, including Background Notes and daily press briefings along with the directory of key officers of Foreign Service posts and more. The Overseas Security Advisory Council (OSAC) provides security information and regional news that impact U.S. companies working abroad through its website http://www.osac.gov

Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.